China May Be a Smaller Pacific Player Than You Think

Chinese Premier Li Keqiang (L) and Fiji's Prime Minister Josaia Voreqe Bainimarama (R) inspect Chinese honour guards during a welcome ceremony outside the Great Hall of the People in Beijing on July 16, 2015. Josaia Voreqe Bainimarama is on a visit to China from July 14 to 24.

Why you should care

Because China may not be buying as much influence in the South Pacific as you think.

By Jamie Smyth

The Daily DoseAUG 16 2018

China has established itself as the second-biggest aid donor in the South Pacific, committing more than $6 billion to projects over the past seven years, as Beijing seeks to expand its influence in the region.

But new figures show that recipient countries have received less than a fifth of the promised aid from Beijing, which has mainly been directed toward flagship projects, such as road building or industrial facilities. Such infrastructure projects are often designed to enhance China’s status and facilitate commerce but can take time to deliver and are often in the form of concessional loans that must be paid back, according to a report by the Lowy Institute, a think tank based in Sydney.

In fact, when it comes to all donors to the region:

China accounts for only 8 percent of the $14.51 billion in actual aid spending in the South Pacific.

Australia remains the largest aid donor, committing $6.72 billion between 2011 and 2018 and spending $6.58 billion. New Zealand, the U.S. and Japan are the third-, fourth- and fifth-largest donors, respectively.

Taiwan, which is locked in a battle for political influence with China in the region, has spent $225 million on 535 projects since 2011.

“China has committed a lot, but it remains to be seen if that is all spent,” says Jonathan Pryke, a Lowy analyst. “Their aid is massively concentrated on around 200 projects.”

He says the prevailing narrative suggesting Chinese aid dominance in the Pacific Islands is overstated. But he says Chinese influence has grown over the past seven years as total aid to the region has fallen by about a fifth over the period, mainly due to a pullback by the U.S., the EU and France.

Western powers are concerned about China’s growing influence in the Pacific, where Beijing is funneling more aid as it builds economic and political ties with island nations. Last year China committed a record $4 billion toward 41 projects, including the rollout of a national broadband network in Papua New Guinea, the 360-meter-long Luganville wharf in Vanuatu — the longest in the South Pacific — and a $5.3 million donation of military vehicles to the PNG defense forces.

In January, Concetta Fierravanti-Wells, Australia’s development minister, accused Beijing of “duchessing” politicians in the Pacific and funding “white elephants,” including “roads to nowhere.” The International Monetary Fund has also warned that China’s disbursement of concessional loans to Pacific nations could sow the seeds of a debt crisis.

Pryke says Vanuatu, Samoa, Tonga and Fiji have heeded these warnings and have not taken aid in the form of loans since 2016. He says there has been a greater appreciation of the debt issue following a recent failure by Tonga to persuade China to grant debt relief over infrastructure loans.

PNG continues to accept loans from Beijing and is by far the biggest aid recipient in the region, attracting total commitments of $5 billion but actually receiving and spending only $402 million.

Some Western powers are increasing their aid to the region to counter China’s influence, with New Zealand raising its aid budget by a third over four years as part of its “Pacific reset” strategy. The Asian Development Bank and the World Bank are aiming to triple their investment in the region over the next five years.

Australia is boosting its aid to the Pacific to record levels, despite steep cuts to its aid budget over recent years. Canberra’s aid to the region is much broader than China’s program. It funds more than 5,000 projects spanning health, education, security and infrastructure.